New research, launched by global professional services company GHD, titled Aquanomics: The economics of water risk and future resilience reveals droughts, floods and storms could result in a total loss of $3.7 trillion to U.S. gross domestic product (GDP) between 2022 and 2050. This is the largest dollar impact faced by any of the countries included in the study, making up the majority of the $5.6 trillion total GDP losses projected across all seven focus countries. This equates to an average annual GDP loss of 0.5%.
This study represents the first time the economic impact of water risk has been calculated at a GDP and sector level. The research combines insurance data with econometric modelling to demonstrate the wider economic impact of increased future water risk. It focuses on seven key countries across GHD’s footprint – Australia, Canada, China, the Philippines, the UAE, the UK and the U.S. – and three U.S. regions – Northeastern U.S., Southeastern U.S. and Southwestern U.S.
Estimated GDP loss by country between 2022 and 2050
Country, Total GDP loss, Average annual GDP loss
- US: $3.719T, 0.5%
- China: $1.144T, 0.2%
- Australia: $312B, 0.6%
- UK: $153B, 0.1%
- Philippines: $124B, 0.7%
- Canada: $108B, 0.2%
- UAE: $27B, 0.1%
When it comes to direct losses, storms are predicted to account for over half of the overall damage ($1.4tn) followed by floods ($645 billion) and droughts ($432 billion).
Estimated total direct losses by event type
- Total direct losses between 2022 to 2050: $2.513tn
- Attributed to flood: $645bn
- Attributed to storm: $1.435tn
- Attributed to drought: $432bn
The study projects, in less than 30 years (2022 to 2050), the Southwestern region of the U.S. could face a total loss of over $1.4 trillion to GDP. In the Northeastern region, water risk is predicted to account for total GDP losses of over $700 billion between these years, and this figure is over $400 billion for the Southeastern region.
Estimated GDP loss by US region between 2022 and 2050
(Region Total, GDP loss, Average annual GDP loss)
- Southwestern region $1.444T, 0.8%
- Northeastern region $718B, 0.6%
- Southeastern region $406B, 0.5%
The study also presents the potential impact on five critical economic sectors: agriculture; fast-moving consumer goods (FMCG) and retail; manufacturing and distribution; energy and utilities; and banking and insurance. It reveals the U.S.’s manufacturing and distribution sector could suffer total losses of $2.2 trillion by 2050 – equating to average annual output losses of 0.7%. The agriculture sector, on the other hand – the most water-intensive industry – faces projected losses of $143 billion by 2050, but this equates to average output losses of 1.2% each year.
Estimated total loss by sector across the US between 2022 and 2050
(Region, Total output losses, Average annual output losses)
- Agriculture, $143B, 1.2%
- FMCG & Retail, $696B, 0.8%
- Manufacturing & Distribution, $2.154T, 0.7%
- Energy & Utilities, $165T, 0.5%
- Banking & Insurance, $288T, 0.3%
Don Holland, water market leader at GHD, says: “The Infrastructure Investment and Jobs Act (IIJA) provides a much-needed injection of funding for the water sector, which has long been starved of the capital needed to maintain vital infrastructure.
Building future water resilience across the U.S. will require solutions as diverse as the types of water risk the country faces. Managing water scarcity caused by drought in California will require an entirely different approach to mitigating the worst impact of storm surges in the Gulf of Mexico. In the Northeast, flooding is the biggest problem, although replacing lead pipes in the drinking water system is also a key priority. In the Southeast, flooding and coastal protection top the agenda. For these regions, a focus on flood mitigation should be at the center of any water resilience strategy.
What unites all these regions is the need to adopt innovative new solutions and technology – which the U.S. has in abundance – and to pursue an approach of radical collaboration across all jurisdictions and stakeholders. In others word a One-Water approach.”
US Water Alliance CEO, Mami Hara says, “This study comes at a critical time in the world’s understanding of the relationship between water and climate. GHD's thought provoking Aquanomics report not only details the potential economic risks to inaction, but it also offers solutions that the water sector and private industry can enact to build resilience and mitigate the effects of flooding, storms, and drought. The US Water Alliance commends GHD for bringing these issues to the forefront and we support expedited and equitable solutions to protect our most precious resource.”
